On December 19, 2016, the Federal Reserve Board announced that it had finalized a regulation requiring large banking organizations (covered companies) to publicly disclose on a quarterly basis certain information about their liquidity coverage ratios (LCRs). The final regulation is substantially similar to the proposed regulation issued in December 2015, but there have been minor modifications.
The LCR regulation requires that certain large banking organizations maintain sufficient high quality liquid assets (such as cash or certain US government securities) to cover cash outflows during a 30 day liquidity stress scenario that includes certain levels of deposit run-off or a reduction in wholesale funding capacity.
Required disclosures will include both quantitative and qualitative information regarding a covered company’s LCR and the high quality liquid assets maintained for the LCR. The purpose of the rule is to give market participants adequate access to information about the liquidity of covered companies presented in a uniform manner so as to allow persons to be able to effectively compare their LCRs. In addition, designated systemically significant nonbank financial companies required to maintain the LCR also would be covered by the rule. A covered company must provide the information on its internet site or in its public financial or regulatory reports.
The final rule is effective April 1, 2017. However, required implementation deadlines have been changed since the proposal. Implementation deadlines depend upon the size of the covered institution. Under the proposal, they ranged from July 2016 to January 2018. The final rule sets the implementation deadlines from April 2017 to April 2018, again depending upon the size of the institution.